Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
FedEx Corp.'s noncontract air customers will see their 2016 rates rise at a faster clip for slower transit times than for the company's premium services that promise faster deliveries, according to data provided today by parcel consultancy Shipware LLC.
According to Shipware data, domestic rates for "Priority Overnight," which guarantees deliveries by 10: 30 a.m. the next day to most U.S. addresses, will rise by 4.69 percent. From there, however, the costs escalate well above the average increase. Prices for deliveries using the unit's "Standard Overnight" service, where parcels are delivered by 3 p.m. the next day, will climb by 6.05 percent, according to Shipware data. Rates for second-day morning deliveries will increase by 7.6 percent, two-day afternoon services by 7.67 percent, and three-day deliveries, known as " Express Saver," will rise 7.34 percent, Shipware said. The services are offered by FedEx Express, the company's air and international unit.
Memphis-based FedEx announced late Tuesday that it would raise its published rates, effective Jan. 4, by an average of 4.9 percent on U.S. domestic and U.S. export and import services. The one exception is FedEx "SmartPost," a service performed in conjunction with the U.S. Postal Service. Those rates, which apply to packages tendered by FedEx to USPS for last-mile deliveries to residencies, have yet to be announced, though the company said those would increase as well.
FedEx's ground-parcel customers will also absorb higher rates than the average increase, mostly for lighter-weighted parcels, according to Shipware data. Rates charged by FedEx Ground, the company's ground-delivery unit, will rise 5.8 percent for parcels weighing one to five pounds. Rates will rise 5.5 percent for parcels weighing six to 10 pounds, 5.4 percent for parcels weighing 11 to 15 pounds, and 5 percent for parcels weighing 16 to 20 pounds, according to Shipware data. Most packages tendered for ground deliveries weigh less than 20 pounds. By contrast, rates on packages weighing 51 to the maximum of 150 pounds will increase less than the average, according to Shipware.
The 2016 ground increases will be distributed more evenly across the weight classes than were the 2015 ground increases. In 2015, the hikes were heavily skewed towards lighter weighted traffic, Shipware said. The minimum delivery charge for transporting a ground package will be $6.94, a 5-percent increase from 2015 levels, Shipware said; between 2006 and 2016, the minimum charge for ground deliveries has risen a cumulative 82.6 percent, Shipware said.
The consultancy said it would analyze the impact of rate increases by FedEx Freight, the company's less-than-truckload (LTL) unit, and for its international services at a later date.
In recent years, FedEx and arch-rival UPS Inc., which hold a near-duopoly on U.S. business-to-business (B2B) parcel services, have raised their published rates at higher levels than the announced averages, depending on the type of service or, more predominantly, the weight breaks of their shipments. Atlanta-based UPS has yet to disclose its 2016 rate increases.
Rob Martinez, Shipware's president and CEO, said the faster pace of increases on the less-urgent FedEx Express services reflects increased customer demand and higher costs to provide the services. "The fact that FedEx, and UPS, continue to levy higher increases on less-premium express services ... than [on] more premium products ... indicates to me that those services carry a higher cost to serve," Martinez said in an e-mail.
Besides the rate increases, FedEx will also hike the costs of a broad range of "accessorial" charges, fees for services beyond the basic pick-up and delivery services. For example, effective this Nov. 2 FedEx Ground will impose a $110 special fee on "unauthorized" shipments, which are packages whose dimensions or combined dimensions and weight are beyond the unit's maximum handling capabilities and would be transported at its discretion. The fee is in addition to the rate charged to move the shipment, according to Shipware data.
FedEx will also boost its surcharge for "oversize" shipments—packages that weigh less than 150 pounds but exceed 108 inches in length or 130 inches in combined length and girth—to $67.50 per shipment from $57.50, Shipware said. The increase, which is on top of the shipping rate, takes effect Jan. 4.
FISCAL FIRST-QUARTER RESULTS
The rate and fee adjustments came the day before FedEx released its fiscal-2016 first-quarter results, which to some extent felt the combined sting of a slowing world economy; the rising value of the U.S. dollar, which curbed export activity; a rise in inventory levels in the U.S. that muted shipping activity; and a drop in capital expenditures as businesses turned cautious during the period. While FedEx Express had a fairly solid quarter, operating income and margins for FedEx Ground and FedEx Freight were pressured by higher operating costs, and by reduced demand due to a drop in industrial production during the period.
Yesterday, FedEx forecast that U.S. industrial production would rise 1.6 percent in 2015, a drop from the 2.2-percent increase it predicted in June. FedEx Freight, which moves a lot of industrial goods, was more impacted by the decline than the two other units, company executives said. Industrial production should increase 2.6 percent in 2016 as manufacturing gets back on track, FedEx predicted. U.S. GDP should rise by 2.5 percent in 2015 and 2.8 percent next year, the company predicted. World GDP should gain 2.8 percent this year and 2.9 percent in 2016, it forecast.
FedEx Express' fiscal operating income and margins rose 45 percent and 5.5 percent, respectively, over the prior-year period, despite a 4-percent drop in revenue due to the impact of lower fuel surcharges and unfavorable currency exchange rates. FedEx Ground's revenues jumped 29 percent from last year's quarter, helped by an 11-percent jump in yields—including the impact of fuel surcharges—resulting from a shift in pricing on parcels measuring less than three cubic feet based on their dimensions rather than their actual weight. However, operating income fell 1 percent and margins dropped 18.4 percentk partly due to higher package sizes and partly to an increase in reserves set aside for self-insurance premiums.
The unit is building hubs in Allentown, Pa., Ocala, Fla., and Tracy, Calif., outside of Sacramento, to accommodate expected increases in B2B and business-to-consumer (B2C) traffic. Construction on two of the hubs has already begun, with work on the third set to begin later this fiscal year, according to Angela Wheland, a FedEx Ground spokeswoman. Work on the third will start later this fiscal year, Wheland said. FedEx's 2016 fiscal year ends next May 31. All three hubs should be operational within the next one to two years, Wheland added.
FedEx Freight posted flat year-over-year revenue, a 21-percent drop in operating income and 10.4-percent decline in operating margins. Average daily shipments fell 1 percent, pressured by weak demand, FedEx said.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.